Arrow Energy and Ephindo are jointly operating the block through Sangatta West CBM Inc a joint venture company which is owned 50/50 by Arrow Energy and Ephindo.

The PSC permit area Sangatta 1 contains coals of Miocene age, of the Balikpapan formation. Net coal thickness for the target zone is up to 40 meters. The permit area is immediately to the south of the Kaltim Prima coal mining area, owned by Bumi Resources, where high gas contents have been measured in a number of areas.

The Sangatta 1 PSC while relatively small is an important part of the company’s gas aggregation strategy for the region. Arrow Energy is currently in negotiations to partner on a number of highly prospective CBM opportunities in nearby areas.

Arrow Energy has been invited to participate in an Indonesian Government forum tasked with facilitating substantial CBM production by the year 2011. Arrow Energy is the only company exploring for CBM in Indonesia that has a proven track record in gas production from CBM.

Arrow Energy believes that commercial gas could be produced in Indonesia as early as 2010 if government regulations were streamlined and barriers to market removed. The current drilling program and upcoming forum represent exceptional opportunities for Arrow Energy and the Republic of Indonesia to work together.